This worked on a 1.7 Community so it is either a server issue/firewall or the jump to 1.8? I have posted the question with a bounty here… http://stackoverflow.com/questions/17139465/python-2-7-magento-community-1-8-api-connection-issues?noredirect=1#comment24888077_17139465
Hopefully someone in the community can take a look at why this is happening.
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